Bill Text: TX HB4772 | 2023-2024 | 88th Legislature | Engrossed
Bill Title: Relating to an excise tax on, and storage, reporting, and recordkeeping requirements for, certain nontobacco nicotine products; providing a civil penalty; imposing a tax.
Spectrum: Bipartisan Bill
Status: (Engrossed - Dead) 2023-05-11 - Referred to Finance [HB4772 Detail]
Download: Texas-2023-HB4772-Engrossed.html
By: Thierry, Burrows, Noble, Button, Cortez | H.B. No. 4772 |
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relating to an excise tax on, and storage, reporting, and | ||
recordkeeping requirements for, certain nontobacco nicotine | ||
products; providing a civil penalty; imposing a tax. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Subtitle E, Title 2, Tax Code, is amended by | ||
adding Chapter 164 to read as follows: | ||
CHAPTER 164. EXCISE TAX ON NONTOBACCO NICOTINE PRODUCTS | ||
Sec. 164.0001. DEFINITIONS. In this chapter: | ||
(1) "Alternative nicotine product" means any | ||
noncombustible product containing nicotine that is intended for | ||
human consumption, whether chewed, absorbed, dissolved, ingested, | ||
inhaled, or consumed by any other means. The term does not include: | ||
(A) an e-cigarette; | ||
(B) a cigarette, as defined by Section 154.001; | ||
(C) a tobacco product, as defined by Section | ||
155.001; or | ||
(D) a product regulated as a drug or device by the | ||
United States Food and Drug Administration. | ||
(2) "Closed-system e-cigarette" means an e-cigarette | ||
that utilizes a nicotine solution in a sealed and prefilled | ||
container that makes the nicotine solution inaccessible to the | ||
consumer through customary or reasonably foreseeable handling or | ||
use, other than use by inhaling vapor or aerosol produced from the | ||
nicotine solution. The term includes a disposable e-cigarette and a | ||
sealed, prefilled, and disposable container of nicotine solution | ||
for use in an e-cigarette. | ||
(3) "Commercial business location" means the entire | ||
premises occupied by a retailer. | ||
(4) "E-cigarette" means a noncombustible product | ||
that: | ||
(A) produces vapor or aerosol for inhalation from | ||
the application of a heating element to a solution that contains | ||
nicotine; and | ||
(B) includes a solution that contains nicotine | ||
intended for use in an e-cigarette, whether sold with the | ||
e-cigarette or separately. | ||
(5) "First sale" means, except as otherwise provided | ||
by this chapter: | ||
(A) the first transfer of possession in | ||
connection with a purchase, sale, or any exchange for value of an | ||
e-cigarette or an alternative nicotine product in or into this | ||
state, which: | ||
(i) includes the sale of an e-cigarette or | ||
an alternative nicotine product by: | ||
(a) a distributor in or outside this | ||
state to a distributor, wholesaler, or retailer in this state; and | ||
(b) a manufacturer in this state who | ||
transfers the e-cigarette or alternative nicotine product in this | ||
state; and | ||
(ii) does not include: | ||
(a) the sale of an e-cigarette or an | ||
alternative nicotine product by a manufacturer outside this state | ||
to a distributor in this state; | ||
(b) the transfer of an e-cigarette or | ||
an alternative nicotine product from a manufacturer outside this | ||
state to a bonded agent in this state; or | ||
(c) the sale of an e-cigarette or an | ||
alternative nicotine product by a manufacturer, bonded agent, | ||
distributor, or importer to an interstate warehouse in this state; | ||
(B) the first use or consumption of an | ||
e-cigarette or an alternative nicotine product in this state; or | ||
(C) the loss of an e-cigarette or an alternative | ||
nicotine product in this state whether through negligence, theft, | ||
or other unaccountable loss. | ||
(6) "Manufacturer's representative" means a person | ||
employed by a manufacturer to sell or distribute the manufacturer's | ||
e-cigarettes or alternative nicotine products for which the tax | ||
imposed under this chapter has been paid. | ||
(7) "Open-system e-cigarette" means an e-cigarette | ||
that utilizes a nicotine solution in a container that is refillable | ||
or otherwise makes the nicotine solution accessible to the consumer | ||
through customary or reasonably foreseeable handling or use. | ||
(8) "Retailer" means a person: | ||
(A) required to hold a permit under Chapter 147, | ||
Health and Safety Code; or | ||
(B) who sells alternative nicotine products to | ||
consumers. | ||
Sec. 164.0002. DESIGNATION OF COMMERCIAL BUSINESS LOCATION | ||
AS PRINCIPAL PLACE OF BUSINESS; STORAGE. (a) A retailer shall | ||
designate one commercial business location as the retailer's | ||
principal place of business. | ||
(b) Except as provided by Subsection (c), a commercial | ||
business location where e-cigarettes or alternative nicotine | ||
products are stored cannot be a residence or a unit in a public | ||
storage facility. | ||
(c) A manufacturer's representative may use a residence or | ||
storage facility as a commercial business location. | ||
Sec. 164.0003. TAX IMPOSED ON FIRST SALE. (a) A tax is | ||
imposed and becomes due and payable when a person receives an | ||
e-cigarette or alternative nicotine product for the purpose of | ||
making a first sale in this state. | ||
(b) The tax rate: | ||
(1) for a closed-system e-cigarette is seven cents for | ||
each milliliter of nicotine solution and a proportionate rate on | ||
all fractional parts of a milliliter of nicotine solution; | ||
(2) for an open-system e-cigarette is three percent of | ||
the wholesale cost price of the open-system e-cigarette; and | ||
(3) for an alternative nicotine product is $1.22 per | ||
ounce of net weight of the alternative nicotine product, as listed | ||
by the manufacturer. | ||
Sec. 164.0004. FINAL POINT OF IMPOSITION OF TAX. The | ||
ultimate consumer of an e-cigarette or alternative nicotine product | ||
in this state shall pay the tax imposed by this chapter. If another | ||
person pays the tax, the amount of the tax is added to the price | ||
charged to the ultimate consumer. | ||
Sec. 164.0005. PAYMENT OF TAX. (a) A person shall pay the | ||
tax on an e-cigarette or alternative nicotine product received for | ||
the purpose of making a first sale at the time the person files the | ||
report under Section 164.0010 in the manner prescribed by the | ||
comptroller. | ||
(b) The person in possession of an e-cigarette or | ||
alternative nicotine product has the burden to prove payment of the | ||
tax on that product. | ||
Sec. 164.0006. PENALTY FOR FAILURE TO PAY TAX. (a) Subject | ||
to Subsection (c), a person who fails to pay the tax when due under | ||
Section 164.0005 shall pay an additional five percent of the amount | ||
of the tax due as a penalty. | ||
(b) A person who fails to pay the tax imposed under this | ||
chapter and penalty imposed under Subsection (a), as applicable, | ||
before the 31st day after the date that the tax is due shall pay, in | ||
addition to the amount required under Subsection (a), an additional | ||
five percent of the amount of the tax due as a penalty. | ||
(c) The minimum penalty imposed by this section is $50. | ||
(d) The dishonor of a check delivered to the treasury or | ||
other form of payment for payment of taxes constitutes a failure to | ||
pay the tax when due. | ||
(e) The attorney general shall bring a suit to collect a | ||
penalty for late payment of a tax imposed under this section. A | ||
suit to collect a penalty under this section may be brought in a | ||
court of competent jurisdiction in Travis County. | ||
Sec. 164.0007. RECORDS OF PURCHASES AND RECEIPTS. (a) A | ||
person who receives an e-cigarette or an alternative nicotine | ||
product for the purpose of making a first sale shall maintain at | ||
each place of business the records of all e-cigarettes or | ||
alternative nicotine products purchased or received. | ||
(b) A retailer shall maintain all records described by | ||
Subsection (a) at the commercial business location designated by | ||
the retailer under Section 164.0002. | ||
(c) The records maintained under this section must include: | ||
(1) the name and address of the shipper or carrier and | ||
the mode of transportation; | ||
(2) all shipping records or copies of records, | ||
including invoices, bills of lading, waybills, freight bills, and | ||
express receipts; | ||
(3) the date and the name of the place of origin of the | ||
e-cigarette or alternative nicotine product shipment; | ||
(4) the date and the name of the place of arrival of | ||
the e-cigarette or alternative nicotine product shipment; | ||
(5) a statement of the number, kind, and price paid for | ||
the e-cigarettes or alternative nicotine products; | ||
(6) the number of milliliters of nicotine solution for | ||
use in a closed-system e-cigarette; | ||
(7) the name, address, and tax identification number | ||
of the seller; | ||
(8) the manufacturer's wholesale price for the | ||
e-cigarette or alternative nicotine product; | ||
(9) the net weight as listed by the manufacturer of | ||
each unit of alternative nicotine product, measured in ounces; and | ||
(10) any other information required by the | ||
comptroller. | ||
Sec. 164.0008. RECORDS OF SALE AND USE. (a) A person who | ||
receives an e-cigarette or alternative nicotine product for the | ||
purpose of making a first sale shall maintain at each place of | ||
business in this state records of each sale, distribution, | ||
exchange, or use of an e-cigarette or an alternative nicotine | ||
product, regardless of whether subject to a tax imposed by this | ||
chapter. | ||
(b) The records maintained under this section must include: | ||
(1) the purchaser's name and address, permit number, | ||
or tax identification number; | ||
(2) the method of delivery and the name of the common | ||
carrier or other person delivering the e-cigarettes or alternative | ||
nicotine products; | ||
(3) the date, amount, and kind of e-cigarettes or | ||
alternative nicotine products sold, distributed, exchanged, or | ||
used; | ||
(4) the number of milliliters of nicotine solution for | ||
use in a closed-system e-cigarette sold, distributed, exchanged, or | ||
used; | ||
(5) the wholesale price of all open-system | ||
e-cigarettes sold, distributed, exchanged, or used; | ||
(6) the price received for the e-cigarettes or | ||
alternative nicotine products; | ||
(7) the number and kind of e-cigarettes or alternative | ||
nicotine products on which the tax has been paid; | ||
(8) the net weight as listed by the manufacturer for | ||
each unit of alternative nicotine product, measured in ounces; and | ||
(9) any other information required by the comptroller. | ||
(c) In addition to the records maintained under Subsection | ||
(a), a person required to maintain records under that subsection | ||
shall prepare and retain: | ||
(1) an original invoice for each transaction involving | ||
an e-cigarette or an alternative nicotine product; and | ||
(2) any supporting documentation relevant to each | ||
transaction showing shipment and receipt used in preparing the | ||
invoices at the place of business, including all bills of lading. | ||
(d) A person required to prepare and retain an invoice under | ||
Subsection (c) shall deliver a duplicate invoice to the purchaser. | ||
(e) A person required to maintain, prepare, or retain any | ||
record described by this section shall maintain all records, as | ||
applicable, for at least four years after the date of the | ||
transaction. | ||
(f) On request of the comptroller, the person shall provide | ||
the records to the comptroller in a manner prescribed by the | ||
comptroller. | ||
Sec. 164.0009. FAILURE TO PRODUCE RECORDS. (a) Except as | ||
provided by Subsection (b), a person's failure to produce a record | ||
on request of the comptroller under Section 164.0007 or 164.0008 is | ||
prima facie evidence that e-cigarettes and alternative nicotine | ||
products not accounted for in a requested report were received for | ||
the purpose of making a first sale without payment of a tax required | ||
under this chapter. | ||
(b) This section does not apply to a person's failure to | ||
produce a record that results from an occurrence beyond the | ||
person's reasonable control. | ||
Sec. 164.0010. MONTHLY REPORT. (a) A person who receives | ||
an e-cigarette or alternative nicotine product for the purpose of | ||
making a first sale shall file a report for the preceding month on | ||
or before the 25th day of each month. | ||
(b) Except as provided by Subsection (c), the report filed | ||
under Subsection (a) must include: | ||
(1) the date the person submitted the report; | ||
(2) the name and address of the person submitting the | ||
report; | ||
(3) the applicable month covered by the report; | ||
(4) the number of units or amount, as applicable, of | ||
e-cigarettes and alternative nicotine products the person | ||
purchased, received, and acquired during the month covered by the | ||
report, with separately stated amounts for: | ||
(A) milliliters of nicotine solution for use in a | ||
closed-system e-cigarette; | ||
(B) the wholesale price of all open-system | ||
e-cigarettes; and | ||
(C) the net weight as listed by the manufacturer | ||
of all alternative nicotine products, measured in ounces; | ||
(5) the number of units or amount, as applicable, of | ||
e-cigarettes and alternative nicotine products the person sold, | ||
distributed, used, lost, or otherwise disposed of during the month | ||
covered by the report, with separately stated amounts for: | ||
(A) milliliters of nicotine solution for use in a | ||
closed-system e-cigarette; | ||
(B) the wholesale price of all open-system | ||
e-cigarettes; and | ||
(C) the net weight as listed by the manufacturer | ||
of all alternative nicotine products, measured in ounces; | ||
(6) the amount of e-cigarettes and alternative | ||
nicotine products the person had in stock at the beginning and at | ||
the end of the month covered by the report; and | ||
(7) any other information required by the comptroller. | ||
(c) If more than 50 percent of all untaxed e-cigarettes or | ||
alternative nicotine products received by the person in this state | ||
are actually sold outside of this state, the person may include in | ||
the report only the e-cigarettes or alternative nicotine products, | ||
as applicable, that are sold in this state. | ||
(d) The comptroller shall prescribe the form and method for | ||
submitting the report under this section. | ||
Sec. 164.0011. INSPECTION. (a) To determine the tax | ||
liability of a person under, or compliance by a person with, this | ||
chapter, the comptroller may: | ||
(1) inspect any premises where e-cigarettes or | ||
alternative nicotine products are manufactured, produced, stored, | ||
transported, sold, or offered for sale or exchange; | ||
(2) remain on the premises as long as necessary to | ||
determine the tax liability under or compliance with this chapter; | ||
(3) examine the records required by this chapter or | ||
other records, books, documents, papers, accounts, and objects that | ||
the comptroller determines are necessary for conducting a complete | ||
examination; and | ||
(4) examine stocks of e-cigarettes or alternative | ||
nicotine products. | ||
(b) A person: | ||
(1) must, on request of the comptroller, produce | ||
records required by this chapter; and | ||
(2) may not hinder or prevent the comptroller's | ||
inspection of records or the examination of the premises under this | ||
section. | ||
Sec. 164.0012. SEIZURE. (a) The comptroller with or | ||
without process may seize: | ||
(1) e-cigarettes and alternative nicotine products | ||
that are possessed or controlled by a person for the purpose of | ||
selling or removing the e-cigarettes or alternative nicotine | ||
products in violation of this chapter; | ||
(2) e-cigarettes and alternative nicotine products | ||
that are removed, deposited, or concealed by a person intending to | ||
avoid payment of taxes imposed by this chapter; | ||
(3) an automobile, truck, boat, conveyance, or other | ||
type of vehicle used to remove or transport e-cigarettes or | ||
alternative nicotine products by a person intending to avoid | ||
payment of taxes imposed by this chapter; and | ||
(4) equipment, paraphernalia, or other tangible | ||
personal property used by a person intending to avoid payment of | ||
taxes imposed by this chapter found in the place where the | ||
e-cigarettes or alternative nicotine products are found. | ||
(b) An item seized under this section is forfeited to the | ||
state and remains in the custody of the comptroller for disposition | ||
as provided by this chapter. The seized item is not subject to | ||
replevin. | ||
Sec. 164.0013. PENALTIES. (a) A person violates this | ||
chapter if the person does not: | ||
(1) keep records required by this chapter; | ||
(2) make a report required by this chapter to the | ||
comptroller or the person makes a false or incomplete report | ||
required by this chapter to the comptroller; or | ||
(3) abide by, or the person violates, any other | ||
provision of this chapter or a rule adopted by the comptroller under | ||
this chapter. | ||
(b) A person who violates this chapter shall pay the state a | ||
penalty of not more than $2,000 for each violation. | ||
(c) A person is liable for a separate penalty for each day on | ||
which a violation occurs. | ||
(d) The attorney general shall bring suit to recover | ||
penalties under this section. | ||
(e) A suit under this section may be brought in a court of | ||
competent jurisdiction in Travis County. | ||
Sec. 164.0014. RULES. The comptroller shall adopt rules as | ||
necessary to implement, administer, and enforce this chapter in a | ||
manner substantively similar to rules adopted for implementation, | ||
administration, and enforcement provided by Chapters 154 and 155. | ||
Sec. 164.0015. DISPOSITION AND USE OF PROCEEDS. The | ||
comptroller shall deposit the proceeds from taxes imposed under | ||
this chapter as follows: | ||
(1) 50 percent to the credit of an account in the | ||
general revenue fund administered by the Department of State Health | ||
Services, which may be appropriated to the department only for the | ||
purpose of administering youth vaping prevention and awareness | ||
programs; | ||
(2) 20 percent to the credit of an account in the | ||
general revenue fund administered by the comptroller, which may be | ||
appropriated to the comptroller only for the purpose of | ||
administering and enforcing this chapter; and | ||
(3) the remainder to the credit of the property tax | ||
relief fund. | ||
SECTION 2. The change in law made by this Act does not | ||
affect tax liability accruing before the effective date of this | ||
Act. | ||
SECTION 3. This Act takes effect September 1, 2023. |